Pakistan still in FATF grey list till 2021 : know everything for IAS Exam

Pakistan still in FATF grey list , Why in News ? : The Financial Action Task Force (FATF) has decided to keep Pakistan on the “Greylist” till the next review of its compliance to the recommendations in February 2021.

Important observations by FATF ?

Why still in grey-list ?

  • Keeping Pakistan on the ‘Grey List’, the FATF strongly urged Pakistan to swiftly complete its full action plan by February 2021.
  • The FATF had issued the 27-point action plan after placing Pakistan on the ‘Grey List’ in June 2018 and it is related to curbing money laundering and terror financing in Pakistan.
  • At recently held plenary session, the FATF observed that Pakistan has made progress across all action recommendations for action plan and effectively address 21/27 points.
  • Currently, International Cooperation Review Group (ICRG) {Since 2007, it analyzed high-risk jurisdictions and recommended specific action} found that Pakistan had complied on 21 points out of 27 points.
  • Points on which Pakistan ineffective to deliver such as –
    • Lack of action against the non-profit organisations linked to the terror groups banned by the UN Security Council (UNSC)
    • Delays in the prosecution of banned individuals and entities like Lashkar-e-Taiba (LeT) chief Hafiz Saeed and LeT operations chief, Zaki Ur Rahman Lakhvi, as well as Jaish-e- Mohammad chief Masood Azhar.
  • Pakistan government claims that others are “untraceable” culprits are untraceable
  • It is also found Pakistan was non-compliant in cracking down on terror financing through narcotics and smuggling of mining products including precious stones.
  • The FATF process also showed concern about the 4,000 names that were on Pakistan’s Schedule-IV list under the Anti-Terrorism Act up to January, but went missing in September 2020.
Pakistan still in FATF grey list till 2021 : know everything for IAS Exam

Financial Action Task Force (FATF)

History

  • In response to mounting concern over money laundering, the Financial Action Task Force on Money Laundering (FATF) was established by the G-7 Summit that was held in Paris in 1989. 
  • Recognising the threat posed to the banking system and to financial institutions, the G-7 Heads of State or Government and President of the European Commission convened the Task Force from the G-7 member States, the European Commission and eight other countries. 

What FATF do ?

  • The Financial Action Task Force (FATF) is the global money laundering and terrorist financing watchdog.
  • As a policy-making body, the FATF works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.
  • It does not take a role in law enforcement matters, investigations or prosecutions. 
  • FATF was not formed as a formal international organisation. Rather, the FATF is a task force composed of member governments who agree to fund the FATF on temporary basis with specific goals and projects
  • FATF does not address at all issues related to low tax jurisdiction or tax competition.
  • FATF mandate focuses only on the fight against laundering of proceeds of crimes and the financing of terrorism.
  • With more than 200 countries and jurisdictions committed to implementing them. 
  • The FATF has developed the FATF Recommendationsor FATF Standards, which ensure a co-ordinated global response to prevent organised crime, corruption and terrorism.
  • They help authorities go after the money of criminals dealing in illegal drugs, human trafficking and other crimes. 
  • FATF also works to stop funding for weapons of mass destruction.
  • FATF reviews money laundering and terrorist financing techniques and continuously strengthens its standards to address new risks, such as the regulation of virtual assets, which have spread as crypto-currencies gain popularity.
  • FATF monitors countries to ensure they implement the FATF Standards fully and effectively, and holds countries to account that do not comply.

How FATF Recommendations evolved ?

  • In April 1990, less than one year after its creation, the FATF issued a report containing a set of Forty Recommendations, which were intended to provide a comprehensive plan of action needed to fight against money laundering
  • In October 2001, the FATF expanded its mandate to incorporate efforts to combat terrorist financing, in addition to money laundering. So, FATF issued the Eight Special Recommendations to deal with it.
  • In October 2004 the FATF published a Ninth Special Recommendations, further strengthening the agreed international standards for combating money laundering and terrorist financing – the 40+9 Recommendations.
  • In February 2012, the FATF completed a thorough review of its standards and published the revised FATF Recommendations.
    • They have been expanded to deal with new threats such as the financing of proliferation of weapons of mass destruction, and to be clearer on transparency and tougher on corruption.

Secretariat:

Its Secretariat is located at the Organisation for Economic Cooperation and Development (OECD) headquarters in Paris.

Also read : India–US 2+2 dialogue 2020 for UPSC

Member Countries:

The FATF currently has 39 members including two regional organisations — the European Commission and Gulf Cooperation Council. In 2010,  India is a member of the FATF.

Decision Making Body:

The FATF Plenary is the decision making body of the FATF. It meets three times per year.

Lists under FATF:

  • Grey List: Countries that are considered safe haven for terror funding and money laundering are put in the FATF grey list (or ‘Jurisdictions under increased monitoring’). This inclusion serves as a warning to the country that it may enter the blacklist.
  • Black List: Countries known as Non-Cooperative Countries or Territories (NCCTs) are put in the blacklist. These countries support terror funding and money laundering activities. The FATF revises the blacklist regularly, adding or deleting entries. As of this year, there are only two countries on the FATF’s black list – North Korea and Iran.

Consequences for Pakistan:

  • The FATF listing makes it extremely difficult for Pakistan to get financial aid from the International Monetary Fund (IMF), the World Bank and the European Union.
  • It will further enhance problems for the nation which is in a difficult economic situation.

What is Pakistan doing to achieve the 27-points plan?

  • Facilitating the Afghanistan peace deal by pushing Taliban leaders to participate in it. Because Pakistan has concern Taliban influence on Youth and close connecting with other terror organisations.
  • Eventually, given the rigorous FATF action plan, Pakistan would realise that only clear actions would free it from the FATF commitments.

India’s Stand:

Pakistan continues to provide safe havens to terrorist entities and individuals and has also not yet taken any action against several terrorist entities and individuals including those proscribed by the UNSC, such as Masood Azhar, Dawood Ibrahim, Zakir-ur-Rahman Lakhvi.

Pakistan still in FATF grey list

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